Pound to Dollar Forecast: "Break Above 1.3590" Could See GBP Target 1.38

Published: Friday, 12 September 2025 09:00 BST - Written by Ben Hughes

STORY LINK Pound to Dollar Forecast: "Break Above 1.3590" Could See GBP Target 1.38

The Pound to Dollar exchange rate (GBP/USD) dipped to 1.3560 (-0.14%) on Friday after UK GDP data confirmed the economy stalled in July.

Pound Sterling had earlier pushed above 1.3550 as the dollar weakened, but growth concerns have capped upside momentum ahead of next week’s Bank of England decision.

GBP/USD Forecasts: Break above 1.3590

The Pound had found support just below 1.3500 on Thursday, lifted by firmer risk appetite and FTSE gains. However, the UK GDP report dented sentiment. Britain’s economy showed zero monthly growth in July, with the Office for National Statistics reporting a sharp 1.3% drop in manufacturing output led by computers, electronics and pharmaceuticals.

Reuters noted that “Britain's economy recorded zero monthly growth in July after a sharp drop in factory output, in line with expectations for a slower start to the second half of 2025.”

Dollar moves will remain a crucial driver, though Friday’s data reinforced fiscal concerns around the UK.

UoB commented; “Flat momentum indicators suggest GBP is likely to range-trade today, expected to be between 1.3500 and 1.3570.”

Scotiabank added; “The GBP continues to trade just above the previously broken descending trend line drawn from the early summer highs.” The bank expects range-trading in the near term but warns a break above 1.3590 could open gains towards 1.38.

In the US, initial jobless claims surged to 263,000 in the latest week from 236,000, the highest reading in two years, while inflation data broadly matched expectations. Headline CPI rose to 2.9% y/y while core inflation held at 3.1%.

Markets remain confident that the Federal Reserve will cut interest rates next week, with a 90% chance of a 25bp move priced in. Expectations of a 50bp cut have eased slightly given sticky inflation.

ING said; “Inflation was a touch higher than expected and tariffs are likely to keep it elevated over coming months, but the weakening of the jobs market is now the Fed's priority, with rising jobless claims hinting at a pick-up in lay-offs at a time when hiring is subdued.”

Wells Fargo added; “We're still looking for a rate cut next week. We're not looking for a jumbo cut as some had expected after the big downward revision to the jobs numbers and then we were still looking for another one or two cuts before the end of the year.”

MUFG maintained a bearish view on the dollar; “We continue to believe that lower US rates will encourage a weaker US dollar heading into year end.”

Scotiabank pointed to the UK calendar; “the calendar will remain heavy into next Thursday’s BoE as we look to employment on Tuesday and CPI on Wednesday.”

Markets expect the Bank of England to hold rates at 4.0% next week, with easing expectations for near-term cuts offering Sterling some support.

Fiscal policy remains a pressure point. AJ Bell investment director Russ Mould said; "Rising government borrowing costs, in the form of higher yields on its bonds, or gilts, mean Rachel Reeves will want to put together a tax-and-spending plan that appeases bond vigilantes."

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TAGS: Pound Dollar Forecasts